Another excerpt in this occasional series from Michael Hudson’s J is for Junk Economics, his often enlightening and generally iconoclastic dictionary of the dismal science (p.231-2).
The pretense that reversing progressive taxation and giving more income to the wealthiest One Percent will maximize economic growth and prosperity for the 99 Percent. The actual effect is to help the rich get richer. The rentier class has manipulated the tax code so that, as Leona Helmsley put it: “Only the little people pay taxes.”
A supporting factoid is that the One Percent spends its income buying products produced by labor. That was Thomas Malthus’s argument for why British landlords should receive agricultural tariff protection (the Corn Laws). His argument endeared him to John Maynard Keynes, but in practice the wealthy bought largely foreign luxuries and financial securities or more property. Today’s One Percent lend out their income and wealth to further indebt the economy to themselves.
Another false assumption is that financiers and property owners (the FIRE [Finance, Insurance and Real Estate] sector) will save and invest their revenue to expand the means of production and employ more labor. In practice, the wealthy wield creditor power to force governments to privatize the public domain and buy companies already in place. When the fictions of “trickle-down economics” lead to financial crises, the wealthy demand that governments rescue banks, give bailouts to uninsured depositors and bondholders, and shift taxes to further favor the FIRE sector at the expense of labor. The result of trickle-down policy is thus economic polarization, not prosperity.
One of the earliest and most blatant expressions of trickle-down demagogy is found in the pleading by Isocrates in his Areopagiticus (VII, 31-34, written in 355 BC). Like most Sophist rhetoric teachers, he charged fees so high that only the wealthy could afford to study with him, so it hardly is surprising that his written speeches supported the oligarchy. “The less well-to-do among the citizens were so far from envying those of greater means that they…considered that the prosperity of the rich was a guarantee of their own well-being.” This may be the earliest written example of the Stockholm Syndrome.
Isocrates praised harsh judges for being “strictly faithful to the laws”. This meant creditor-oriented laws. He noted that “judges were not in the habit of indulging their sense of equity”, that is, what would be fair in the traditional morality of mutual aid. His over-the-top rationale for why Athenian judges “were more severe on defaulters than they were on the injured themselves” (meaning the creditors “injured” by not being paid in full) was that “they believed that those who break down confidence in contracts” (as if being unable to pay was a deliberate attack on pro-creditor laws) “do a greater injury to the poor than to the rich; for if the rich were to stop lending, they [the rich] would be deprived of only a slight revenue, whereas if the poor should lack the help of their supporters they would be reduced to desperate straits.” It is as if usury doesn’t deprive the poor of their land and liberty, which Socrates did not hesitate to explain as the “sting” of usury that stripped debtors of their land and hence degraded their status as citizens.”